Office Depot Realigns, Reaffirms Delay of Company Split – Modern Distribution Management

The board of directors for the ODP Corporation, which operates as Office Depot, reaffirmed its stance June 21 on delaying splitting the company into separate B2B and B2C entities following a review of proposals to purchase the company’s consumer-centered operations.

“Given current market and macroeconomic conditions, as well as the benefits of maintaining purchasing and supply chain synergies, the board has determined that now is not the right time to further pursue separating the company into two independent, publicly-traded companies,” said Joseph Vassalluzzo, chair of the board of directors of ODP Corp. “However, the completion of our internal reorganization will make such a potential separation substantially simpler should the company determine to resume the separation process following a change of market conditions in the future.”

The recent reorganization involved transforming operations under ODP Corp.’s holding company structure into a B2C business and three distinct B2B business and “digital segments focused on further enhancing value for shareholders,” the company said:

• Office Depot, LLC: A leading provider of retail consumer and small business products and services distributed via approximately 1,000 Office Depot and OfficeMax retail locations.
• ODP Business Solutions, LLC: ODP’s leading B2B solutions provider serving small, medium and enterprise-level companies. This includes the contract sales channel of ODP’s prior Office Depot Business Solutions Division; Grand & Toy, operating one of the biggest distribution networks serving customers in Canada coast-to-coast via its direct sales force and best in class ecommerce platform; and the company’s Federation Entities, which comprise more than a dozen regional office supply distribution businesses acquired by ODP as part of its transformation to expand its reach and distribution network into geographic areas that were previously underserved, and which continue to operate under their own brand names.
• Veyer, LLC: A supply chain, distribution, procurement and global sourcing operation. Veyer procures and distributes products for both Office Depot, LLC and ODP Business Solutions, LLC, as well as third-party customers.
• Varis, LLC: ODP’s B2B digital platform technology business focused on transforming digital commerce between buying organizations and suppliers.

With the realignment in place, ODP Corp. said divesting the company of its B2C entity has been on hold since earlier this year “pending evaluation of potential opportunities to divest the company’s consumer business.”

Industry reports indicate ODP has considered separating its B2B and B2C operations for some time, including fielding multiple offers from competitor Staples, which has sought to purchase some or all of Office Depot’s business entities.

Despite some unpredictable market conditions,  ODP Corp. said it expects to earn about $2 billion in revenue during the second quarter of this year.

“Our operating flexibility and balance sheet currently have us well-positioned to continue delivering strong results against a macroeconomic backdrop that remains challenged by inflation and supply chain constraints,” said Anthony Scaglione, executive vice president and chief financial officer of ODP. “For the second quarter of 2022, we expect consolidated revenue to be approximately $2 billion and adjusted EBITDA in a range of $85 to $90 million. We continue to expect our full-year 2022 results to be in-line with the previous year and will provide more details regarding our operating segment realignment and long-range outlook, including capital allocation and returns, in the coming months.”